Magnesium alloys show promise in meeting the demand for materials of lighter weight and higher rigidity. Mg alloys are hard to process and normally require grain refining for improved formability and mechanical properties. To process these fine-grained Mg alloys effectively, it is important to relate their load stress and mechanical properties to changes in their microstructures. Using a biaxial tensile machine and cruciform specimens, to evaluate the mechanical properties, microstructure, and plasticity, in a high temperature biaxial stress state, used of AZ31 Mg alloy sheet. With biaxial deformation, grain boundary slide occurred more frequently than with uniaxial deformation, causing grain boundary separation and formation of micro-voids between the grains. In the vicinity of the cracks and at the locations of grain boundary separation, although deformation temperature at higher than the recrystallization temperature, fine grains (about 2 μm) showing in duplex grain structures were formed locally. The formation of duplex grain structures as a result of local formation of fine grains during the deformation process is a major issue to be solved from the viewpoint of plasticity processing.